Enterprise Value to EBITDA

Which of the following is true regarding the EV/EBITDA multiple?

Well, no. Cash is removed from enterprise value, so cash holdings are excluded from the measure entirely.

Probably not. Market values of debt and equity are used for enterprise value calculations when available, especially for common equity.

Yes! Free cash flow to the firm (FCFF) includes capital expenditures, which is a necessary charge for business and a valid deduction from funds available for investors. EBITDA doesn't always match these charges well.

It can be distorted due to cash holdings

It's often calculated entirely with book values

It's less theoretically accurate than using free cash flow to the firm